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InterDigital (IDCC) Beats on Q2 Earnings Despite Lower Revenues

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InterDigital, Inc. (IDCC - Free Report) reported modest second-quarter 2021 results with the bottom line beating the Zacks Consensus Estimate despite top-line contraction. The quarterly results were largely in accordance with the overall company’s expectations.

Net Income

Net income in the June quarter was $1.6 million or 5 cents per share compared with $22.3 million or 72 cents per share in the prior-year quarter. The decline was largely due to lower revenues and higher operating expenses. Adjusted earnings in the reported quarter were 39 cents per share, which topped the Zacks Consensus Estimate of a loss of 25 cents, delivering a surprise of 256%.

InterDigital, Inc. Price, Consensus and EPS Surprise InterDigital, Inc. Price, Consensus and EPS Surprise

InterDigital, Inc. price-consensus-eps-surprise-chart | InterDigital, Inc. Quote

Revenues

Total revenues decreased to $87.7 million from $104.5 million in the prior-year quarter owing to challenging macroeconomic environment. Second-quarter 2020 revenues had included contribution from a handset manufacturer that has since exited the business and non-current patent royalties from a fixed-fee patent license agreement. The top line was at the high end of the company’s guidance and surpassed the consensus estimate of $86 million.

While total revenues from patent royalties equaled $86.2 million, the same from current technology solutions was $1.5 million. Recurring revenues were $78.1 million compared with $85.2 million a year ago.

During the quarter, InterDigital inked an agreement with China-based handset manufacturer Xiaomi for licensing its patent portfolio. This underscores the strength of its portfolio across several key technologies related to cellular wireless, including 3G, 4G, and 5G, WiFi, and HEVC video technology. Approximately 80 companies across the globe licenses InterDigital’s patent technology, including leading firms like Apple, Huawei, Samsung and Sony.

Other Details

Total operating expenses increased to $90.9 million from $72.6 million in the prior-year quarter, primarily driven by non-recurring charges of $15.2 million mostly related to restructuring initiatives. Operating loss was $3.1 million against an operating income of $31.9 million a year ago, due to lower revenues and higher operating expenses.

Cash Flow & Liquidity

During the first six months of 2021, InterDigital utilized $37.1 million of cash in operating activities against cash flow of $42.9 million in the year-ago period. As of Jun 30, 2021, the company had $835.9 million in cash, cash equivalents and short-term investments with $464.2 million of long-term debt and other liabilities.

Zacks Rank & Stocks to Consider

InterDigital currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Clearfield, Inc. (CLFD - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Juniper Networks, Inc. (JNPR - Free Report) and Qualcomm Incorporated (QCOM - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered a trailing four-quarter earnings surprise of 49%, on average.

Juniper has a long-term earnings growth expectation of 11.8%. It delivered an earnings surprise of 7.5%, on average, in the trailing four quarters.

Qualcomm has a long-term earnings growth expectation of 21%. It delivered an earnings surprise of 13.5%, on average, in the trailing four quarters.